US Day-to-Day Banking Shifts Online

In the United States, customers are shifting fast to using online banking services. This doesn’t necessarily spell the end of the branch network, but the banking population is showing a preference for using different channels depending on the type of transaction they want to make.

A study carried out by Novantas – ‘advisors to the financial services industry’ – shows that in the U.S. customers are deserting bank branches more and more, preferring to use remote channels. For example, when transferring funds, 15% of all customers surveyed in 2011 stated that they preferred to go into their branches, compared with 45% in 2006. This doesn’t mean, however, that there’s no reason for the branch to exist - it is still regarded as an important channel for high-value transactions. This view seems to have the backing of the 66% of respondents who say that it is important to have a physical bank branch nearby, while 47% still see it as vital for a bank’s credentials to maintain a physical footprint. But this trend is very much secondary to the increasing customer preference for self-service channels, as expressed by 53% of respondents.

Variations in behaviour

However, not all customer behaviour is identical when it comes to online banking services. The customer base appears to consist of three segments. First, the ‘Branch-Centric Traditionalist’, who prefers to carry out his/her transactions at the branch and visits it three or four times a month. These customers account for 25 to 40% of the banking population. Some 86% of this segment say that having a branch nearby is an important criterion in their choice of bank. Then there’s the ‘Ultra-Connected’ client who goes to the branch as often as the traditionalist, but, by contrast, also uses the various remote channels for those same banking operations. Thirdly, the ‘Virtually Domiciled’ customer, who only uses the branch for major interactions with the bank and on a day-to-day basis prefers to use remote channels. This last segment accounts for up to 35% of the banking population, and 86% of these customers say their choice of bank is motivated by the user-friendliness of the bank’s online services.

Adaptation needed

The banking sector therefore needs to adapt if it wants to meet the needs of these different customer segments. First of all banks need to analyse their client portfolio so as to understand what customers are doing and where they are doing it. Second, they should rethink their current distribution network and reduce any unnecessary costs. Third, they ought to be investing in technology and making efficient self-service tools available to their customers in order to facilitate the natural transition to online. Finally, they should identify their different customer groups and take a more segmented sales approach based on the various different channels, both physical and virtual.

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